A borrower has secured a 30 year, $800,000 loan at 7%. Fifteen years later, the borrower has the…

A borrower has secured a 30 year, $800,000 loan at 7%. Fifteen years later, the borrower has the opportunity to refinance with a fifteen year mortgage at 6%. However, the up front fees, which will be paid in cash, are $12,500. Should the borrower refinance? (Hint: Review refinancing handout)

Pmt based on old loan A. $5,322.4 B. $4332.4 C. $2332.4 D. $332.4

Balance after 15 years A. $592,150.93 B. $92150.93 C. $2150.93 D. $150.93

New PMT based on the new rate A. $5,322.4 B. $4996.9 C. $2332.4 D. $332.4

Difference in PMT OLD–NEW A. $445.5 B. $335.5 C. $222.5 D. $111.5

PV of Savings from refinancing A. $8,758 B. $39,758 C. $28,758 D. $18,574

Should the borrower refinance? (Hint: Review refinancing handout) A. Yes because saving>cost B. No because savings < cost C. Indifferent because savings = cost D. Do not have sufficient info to answer